In the past, most insurance companies calculated premiums for each of their policyholders based on specific characteristics and demographics. Today, however, more car insurance companies are moving toward the use of telematics to calculate premiums. In fact, several major insurers are already using this technology, including Progressive, Nationwide, and others. Below is an overview of telematics and how it affects car insurance premiums.
What Is Telematics?
Telematics uses technology to keep track of your driving habits. For example, when you purchase a policy that incorporates telematics, your insurance company will most likely track the places you drive, your speed, and the time of day you usually travel. The insurance company will also collect data about other driving behaviors, such as braking and cornering. If you are involved in an accident with a telematics device in your vehicle, your car insurance company will usually be notified.
In most cases, data is collected by a device that plugs into a port in your vehicle. All of this data will be transmitted to the insurance company wirelessly.
Why Do Insurance Companies Use Telematics?
Telematics provides insurance companies with much more detailed information about a driver’s habits. Rather than relying only on demographics to calculate premiums, the insurance company can get a more accurate estimate of the driver’s risk of a claim based on the data collected using this technology. Insurance companies can also expedite the processing of claims when they are able to receive data from a telematics device in real–time.
Another reason insurance companies have made a move toward telematics is related to driver safety. Insurance companies reward drivers for their safe behavior on the road by lowering premiums. Because drivers are aware of this incentive, they are more likely to pay attention to their speed and other actions on the road to save money. This leads to safer driving among policyholders overall, thus lowering the number of claims the insurance company has to pay.
Making the Most of a Policy with Telematics
If you purchase an insurance policy that incorporates telematics, you have more options for lowering your premiums and keeping them affordable than you would with a traditional insurance policy. Some tips for keeping your premiums as low as possible include:
- Don’t drive at high speeds.
- Pay attention to your braking habits.
- Don’t take corners too quickly.
- Limit the amount of time you spend driving late at night.
If you notice that your premiums are higher than expected with your telematics policy, talk to your insurance agent to determine the factors causing the price increase.
Contact an Insurance Agent
At this time, you still have the option of purchasing insurance with or without telematics. Because every driver is unique, drivers should make this choice based on their situation. If you are not sure whether a policy with telematics is the best option for you, one of our agents will be happy to review your situation and help you make the best decision. Contact Feivor Insurance Agency today to get started.